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Tongaat Hulett fights Zimra over VAT inconsistencies

                                                    Hippo Valley Estates
Beatific Gumbwanda
CHIREDZI-
Tongaat Hulett Zimbabwe has taken sugarcane farmer associations to task for allegedly
working in cahoots with the Zimbabwe Revenue Authority (Zimra) to dodge Value
Added Tax (VAT) which was remitted from their 23 percent Division of Proceeds
(DoP)
The
company got into milling agreements with many small-scale ‘A2’ farmers represented
by such organisation as Zimbabwe Sugarcane Development Association, Mkwasine
Sugarcane Farmers Trust, Zimbabwe Cane Farmers Association, Commercial
Sugarcane Farmers Association of Zimbabwe, Hippo Valley Productive Sugarcane
Farmers Association, Zimbabwe Sugarcane Development Association Royal Trust,
Chipiwa Mill Group, Chiredzi Productive Cane Growers Association.
A
total of 23 percent of the value of the sugarcane taken to the mill is taken by
Tongaat Hulett to cover milling costs while the remaining 75 percent is
remitted to the farmer in an arrangement known as DoP.
According
to the summons served to the sugarcane associations by the two Tongaat Hulett
holding of Triangle Limited and Hippo Valley Estates through their lawyers Scanlen
and Holderness, the arrangement is that valued added tax (VAT) is also levied and
added on top of the milling costs and the total is then invoiced to the farmer.
In
the summons, Tongaat Hulett is challenging Zimra, accusing the tax collector of
double standards by backtracking from its authorization that the company should
collet VAT on its behalf.
“The
first respondent (Zimra) acknowledged as correct the position that the
applicants may meanwhile charge and collect VAT on the alleged milling service
charge from the farmers. However, in a meeting the applicants had with the
commissioner and other officers of the first respondent, they were surprised to
be instructed by the first respondent that they were not entitled to charge,
levy and collect VAT on the alleged milling service be it for past, present or
future supplies. The reason given for it was allegedly that VAT is already
included in the supposed price of charge for the milling service.
“Factually,
that would not be correct as the milling charge under the DoP is exclusive of
VAT. Put differently when the formula for determining the attributable value in
the provision of a milling service in processing or beneficiation of sugarcane
to sugar is considered, the resultant 23% value which is payable by the farmer (under
cane milling agreement) and that is determined by applying the DoP on the
proceeds is the actual cost associated with the milling of sugarcane before any
value added tax (VAT) which the first respondent may consider applicable to
it,” the summons read.
The
sugar producer is seeking to recover about six million dollars which it was
directed to pay as VAT but which it now believes was supposed to be paid by
farmers.
“The
applicants sought to recover from the farmers the VAT which they (applicants)
were directed by the first respondent to pay. The applicants believed that it
was only reasonably proper in the circumstances that assuming without conceding
that it is correct as decided by the first respondent that they were considered
as providing to the farmers a service which attracts VAT, then they will be
entitled and required by the same token to charge, levy and collect it from the
recipient of the service who is the farmer as would be the case anyhow with a
regular cane milling agreement,” the summons further read.
Chiredzi
West Member of Parliament (MP) Farai Musikavanhu and his Chiredzi North
colleague Roy Bhila are listed as 10th and 11th
respondents respectively over their alleged role in advocating for Zimra to get
VAT remittances of farmers directly from Tongaat Hulett.

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